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Economist: Chinese Consumption Levels Just Fine

Greg Fager, an expert on Asian-Pacific economics at the Institute of International Finance, told members of the National Economists Club that Chinese production and consumption is still continually ready to grow, despite some reports and predictions to the contrary. Fager mocked recent U.S. mainstream media’s negative assertions such as “China’s consumption is not as strong as data shows” (Reuters) and “Rising wages will bust China’s bubble” (Financial Times).

“It’s phenomenal the production going on there. That’s why I laugh at quotes like ‘workshop [of the world] on the wane,’” said Fager. “China always pushing up, always read to grow. It’s policy that is keeping a lid on that growth.”

He noted that China’s version of a recession means GDP dipped to +7%. Additionally, projections show the Chinese middle class population, about 56 million or 4% of total population in 2000, will surge to 361 million or 25% of the population by 2030. And, said Fager, these upward-moving consumers care about better quality food, cosmetics, electronics and on down the line.

“The Chinese middle class is going to be influencing products made all around the world,” he argued. “You can already see it now with car sales around the top 20 cities in China, and they haven’t even dented potential Chinese auto demand. If you think they’re consuming too little, just wait for it.”

That said, there still are areas where improvement is necessary. One glaring example is in the banking system and emerging use of “shadow” banking. But he believes other problems, such as concern about inflation and competitiveness amid rising wages, won’t hold China back. More importantly, the rising wages will help fuel domestic consumerism.

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